Cargo security to data standardization?
There’s been a lot of attention paid in the last year to Japan’s new so-called 24-hour rule, which is designed to give Japan’s customs and security officials the same types of early access to ocean cargo documentation that the United States has had for years.
The rule, which goes into effect in March, requires vessel operators and non-vessel-operating common carriers to electronically submit detailed information on maritime container cargoes at least 24 hours before departure of the vessel from a port of loading. It mirrors requirements already in place for the United States, Canada, Mexico and the European Union.
The attention paid to Japan’s rule, however, probably exceeds its true relevance to most global shippers. For those shippers that neither ship from nor to Japan, the rule would seem to matter little.
But it could mean more than they think.
By saying the attention surrounding Japan’s new regulation probably surpasses its actual impact I’m not seeking to belittle the importance of Japan in terms of global trade. Japan is still the world’s third largest economy, by some margin.
What I’m getting at is the attention paid to this rule signifies a change not in Japan’s place in the global pecking order, but rather the type of data now being collected by Japanese Customs is exactly the type of data that the ocean freight industry needs to standardize.
And not just for customs and security purposes either. It’s just possible regulations like those that have come into effect in the United States and Japan could be the catalyst for documentation standardization across a range of applications.
That means standardized data for the purposes of the procure-to-pay cycle, from purchasing freight transportation services, to the execution of those services, to the payment for those services.
It’s really about that old cliché — killing two birds with one stone. In this case, it’s about leveraging the data that now has to be provided to regulatory agencies to make transportation management better.
“To me that builds the underlying base that’s driving technology forward,” Bryn Heimbeck, president at the logistics software provider Trade Tech, told American Shipper. “As more countries adopt the (World Customs Organization) framework (for security regulations), it’s like building the infrastructure network, like building the highways.”
The key is much of the data required by customs agencies is the same type that powers transportation management systems and procurement engines.
Japan’s 24-hour rule requires this data be transmitted electronically. Shippers should be aiming to improve the extent to which they enter their data electronically. That’s the link.
But more than just moving to a platform where the information on documents like commercial invoices or arrival notices is moved electronically, the crucial step is moving to an environment where information is keyed in once and only once, and where customs agencies, third-party logistics providers, transportation service providers, and shippers all work from the same set of data.
Heimbeck characterized it as the difference between being documentation-based or function-based.
“It’s about working with someone in terms of a flow of information,” he said. “We’re going to look back 20 years from now and see a form as quaint. The carrier doesn’t want a form; they want the data to integrate into their system.”
Again, Heimbeck is of the opinion this change is already underway, and security mandates are precipitating that change.
“Look at what’s happening with security standards,” he said. “They are stipulating that a container must look like this, a code for a carrier always looks like this. There is a 90 percent correlation between AMS (Automated Manifest System) and ISF (Import Security Filing). The base standard itself looks almost identical. They are laying down the standards, laying down the framework.”
The dynamic behind this change is, of course, the Web. Cloud-based architecture enables people and systems in divergent locations to access that same piece of information and do with it what they need to. But that architecture already exists today and is being improved upon every single day.
The missing piece is data standardization.
Will it come from inside the industry? Will, for instance, ocean carriers competing against one another come to the conclusion that it behooves them all to decide on a standardized list of data points that corresponds to each shipment? Will they agree on a standardized format? Will they agree down to the number of characters that should be assigned to a consignee’s name on a bill of lading? Will they agree that Hong Kong should always be shortened to HK, and not HKG?
Or will it be the governments that decide this for the industry? Will security mandates be enough of a catalyst to effect change fast enough? Or will there be a format for shipping data going to the European Union, and a different format for China, and a different format for the United States?
Or will it be the technology providers? Will their systems become so effective as to render moot the argument that the industry has to standardize itself? Rather, will technology solutions take all the different data formats of all the different transportation providers and all the 3PLs and all the shippers, and instantly transform that into a standardized format usable by all? Even for those partners who may not be in that provider’s network? Even for the customs agencies that mandate the information they receive comes in a unique format?
The answer is all three of these sources contribute to standardization of ocean freight data. The pace may be glacial to some, but a combination of three things (global regulatory directives, the realization from service providers that data accuracy and efficiency is paramount and incessant innovation from technology providers) is effecting change.
It may seem like a giant leap to go from a security mandate in a country where many people have no cargo interest to true global data standards. But, as Heimbeck might say, that’s documentation thinking, and not function thinking.